The _____ growth model is a type of dividend discount model in which there will be no change in the dividend rate from year to year.

Question

Quizplus · Accepted Answer

The constant growth model assumes that the dividend will grow at a constant rate indefinitely. This assumption implies that the company has a stable and predictable growth rate, and that the dividend payout ratio (the percentage of earnings paid out as dividends) remains constant over time. This model is also known as the Gordon Growth Model, after economist Myron Gordon who first proposed it. The other answer choices (B) buy-and-hold, (C) risk averse, and (D) fixed, are not related to the constant growth model.

The _____ Growth Model Is a Type of Dividend Discount